By Babajide Komolafe

Nigeria Deposit Insurance Corporation (NDIC) has said that  risk based supervision of banks in the country has become critical in view of the increasing complexity of the financial system, the products and services offered by the banks.

Managing Director/Chief Executive, NDIC, Alhaji Umaru Ibrahim said this at the commencement of a  six- week training programme on risk-based supervision organised by the Corporation in  collaboration with the Office of Technical Assistance (OTA) of the United States Treasury.

In his keynote address,  Ibrahim said that the need for the adoption of RBS framework in the supervision of banks in the country was based on the fact that both the system and the institutions were getting more complex in terms of size, nature of products and volume of transactions.

He added that if these complexities were not properly identified, measured, monitored and controlled, they could inflict damages on the institutions and the system at large.

He  described risk-based supervision (RBS) as a proactive and efficient supervisory process, which focuses attention on the risk profile of the supervised financial institutions and enables the bank supervisors to develop a supervisory package for each bank.

The bank supervisors, he said, would also efficiently allocate resources based on the risk profile of individual banks and proactively monitor and supervise the banks in order to promote safety, soundness and stability of Nigeria’s financial system.

Explaining the rationale behind the RBS training programme, he said that the shift from transaction and compliance-based supervisory approach to risk-based supervision posed a lot of challenges to the supervisory authorities, the biggest of which is capacity-building.

He  pointed out that the NDIC examiners and analysts who are directly involved in the supervision of banks and other financial institutions require adequate training on the new supervisory approach.

He argued: “We need to be ahead of the operators to be able to understand what they are doing and the nature as well as the quantum of risk they harbour and the necessary risk mitigants they put in place. This training and indeed the intervention of OTA in this area is part of the giant strides taken by the Corporation to strengthen the supervisory capabilities of our examiners and analysts.”

The training programme is designed by the OTA Technical Adviser on risk-based supervision, Mr. B. C. Hamilton and NDIC’s Director of Bank Examination Department, Mr. Olanrewaju Sulaimon and it is broken into five areas: Sensitivity to Interest Rate Risk, Risk Management, Operational and Market Risk, Anti-Money Laundering (AML) with emphasis on AML International Transactions relationships and Owned Real Estate.